New Frontiers in Derivatives Trading: Shipping

by Axel Pierron, March 1, 2005


Paris, France March 1, 2005


In a new report, New Frontier in Derivatives Trading: Shipping, Celent analyzes the shipping industry痴 structure and discusses market participants and general trends. The report also offers a thorough examination of the shipbroking derivatives market specifically, dissecting its various products, identifying opportunities, and outlining future trends.

According to Axel Pierron, Celent analyst and author of the report, "The shipping industry is impacted by numerous factors, from national economic production to weather changes. This results in incomparable volatility in shipping prices, especially in the freight market. This uncertainty generates major risk for market participants, who are eager to adopt tools to reduce their risk and hedge themselves against the market痴 volatility. Not surprisingly, derivatives products that have been developed to hedge risk at every moment of a ship痴 life cycle庸rom Forward Ship Value Agreements to Demolition Forward Agreements預re now becoming highly popular in this industry. Forward Freight Agreements, or FFAs, make up the fastest-growing segment of this market."

In 2003, transaction volumes in the freight derivatives market experienced 84 percent growth over 2002; in 2004, the increase was 71 percent. This has generated considerable interest from players outside the shipping industry, such as traditional financial brokers. Since FFAs are at a point of convergence between the shipping industry and financial markets, they require from participants a knowledge of both markets.

Imarex, the only e-trading platform for FFAs, has had impressive results. Since the platform痴 launch in 2002, Imarex trading volume has enjoyed an average quarterly growth of 165 percent, demonstrating a strong interest from market participants in e-trading of FFAs. "It would be surprising if this success does not convince e-trading platforms outside this space that already have the technology to expand their product range and capture a piece of this tempting pie," says Pierron.

The 28-page report contains 16 figures and three tables. A

is available online.

of Celent Communications' Retail Securities & Investments and Institutional Securities & Investments  research services can download the report electronically by clicking on the icon to the left.  Non-members should contact for more information.


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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents


Paris, France March 1, 2005

New Frontiers in  Derivatives Trading: Shipping

Return to report Abstract


Executive Summary 3
Introduction 5
Ship Brokerage Spot Market 6
The Shipping Industry 6
Overview of the Spot Freight Market 8
Trends in the Spot Freight Market 10
Shipbroking Derivatives Products 14
The Baltic Exchange 15
The Freight Derivatives Market: Trading FFAS 16
Electronic Trading in Freight Derivatives: IMAREX 21
Concluding Thoughts 25
Recommendations 26
Objectivity and Methodology 27

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